Homeowners in Australia are bracing themselves for potential financial strain as the Reserve Bank of Australia (RBA) has hinted at raising interest rates three times this year. The release of the Consumer Price Index (CPI) data for the first quarter of 2024 has dashed hopes of a rate cut, with inflation dropping from 4.1 per cent to 3.6 per cent since the December quarter.
Judo Bank chief economic adviser Warren Hogan has predicted that the RBA could increase interest rates by 0.25 points three times this year, bringing the cash rate to 5.1 per cent. Hogan emphasized that the current cash rate of 4.35 per cent may not be sustainable, and the RBA’s strategy of keeping rates low to stimulate the economy might not be effective.
Hogan’s forecast is based on the need for the RBA to align Australia’s cash rate with other countries like the United Kingdom, United States, and New Zealand, where rates are above 5 per cent. He believes that the RBA will implement these rate hikes in the August, September, and November meetings.
Despite the rise in unemployment to 3.8 per cent in March, up from 3.7 per cent in February, the expectation is that the RBA will not consider a rate cut anytime soon. Economists suggest that a more balanced labor market with less pressure on wages growth would be necessary for the RBA to contemplate lowering interest rates.
With various forecasts from different financial institutions, homeowners are advised to stay informed about the changing economic landscape and prepare for potential interest rate hikes in the near future.